The Western Australian government hopes to raise $48 million in additional revenue through a 4 per cent surcharge on property purchases made by foreign buyers.
The surcharge, which will apply to the purchase of residential properties from 1 January 2019, is expected to raise $49 million over the forward estimates and a net revenue of $48 million.
“The government did not consider other increases to property tax as part of its budget repair measures, recognising the impact of the three consecutive land tax increases in the 2013-14, 2014-15 and 2015-16 budgets under the previous government,” WA Treasurer Ben Wyatt said.
Damian Collins, managing director for property investment consulting company Momentum Wealth said domestically, there were no major changes affecting domestic buyers, “which is important for the rebounding industry”.
“It is also encouraging to see such positive estimates for the economy which supports our view on the recovery of the residential property market as well. We are already seeing increased competition in the market for good property, and confidence in the market is increasing.
“While there could be a slight impact from [the foreign buyer surcharge, foreign investment only represents a small proportion of the WA property market, instead, the billions of dollars’ worth of key transport infrastructure spending will put the property market in a strong position to continue its steady recovery.”
Likewise, Travis Coleman, CEO of ACTON, said this budget is encouraging, as it shows signs of recovery for the state.
“[The state government] predicted that economic growth in WA is forecast to pick up to 3 per cent in 2017-18 which is up from just 0.25 per cent in 2016-17,” Mr Coleman said.
“The state government is also predicting that increased labour demand is set to drive a return to employment growth this financial year at an estimated rate of 1.5 per cent.
“These positive predictions on the state economy follow release of figures that show a surge in mineral exploration in WA with the number of mineral exploration licence applications up by 45 per cent to 669 in the June 2017 quarter.”
The changes follow similar moves in New South Wales; in the June budget, it was revealed that the surcharge on stamp duty for foreign buyers could double to 8 per cent.
What effect will it have?
Mr Coleman predicted an upswing in buyer activity, with future positive news to strengthen consumer confidence further. Currently, Mr Coleman sees enquiries for high-end properties increasing and the time frame for vacant rental properties falling.
“All this data points to the fact that now is a great time to buy property in WA before the recovery in the economy and the property market gains further momentum,” he said.
However, just last week (6 September) the Housing Industry Association (HIA) warned that governments should “proceed with caution” as “punitive measures” against foreign investment activity could trigger an accelerated decline in home building.
According to the HIA, foreign investors inject up to $70 billion into Australian real estate annually.
Additionally, at a speech made in Sydney on 8 September, the governor of the Reserve Bank of Australia, Philip Lowe, said that he predicts the financial relationship between Australia and China would “deepen further” and noted that China is an “important source of direct investment” in Australia.
He added: “The internationalisation of the renminbi [the Chinese currency] and the associated capital account liberalisation in China is likely to be one of the biggest forces shaping the global financial system over the next decade or so.”
This view is supported by CT Johnson, managing director at China research company Cross Border Management, who told Smart Property Investment’s sister publication Mortgage Business that attempts to hold back Chinese investment are akin to attempting to “hold back the ocean with a broom”.